Ibec chief ‘more confident’ there will not be a hard Brexit in March 2019
about 3 hours ago
Business leaders including Ibec chief Danny McCoy (second business leader from left) arrive at 10 Downing Street to meet British prime minister Theresa May. Photograph: Jack Taylor/Getty Images
Theresa May has urged European business leaders to persuade their governments to accelerate negotiations on Britain’s trade relationship with the European Union after Brexit.
The British prime minister made her appeal during a meeting at 10 Downing Street with the leaders of a number of British and European business groups, including Danny McCoy of Dublin-based employers’ group Ibec.
Brexit secretary David Davis and business secretary Greg Clarke, who were also present, reinforced Ms May’s message that the shape of the final deal was essential for a post-Brexit transition deal to be effective.
“I think their message to the business community was: convince your governments of the merits of knowing what the ultimate deal is in order for a transitional agreement to be meaningful. If you enter into that transitional phase in March 2019 and still don’t know what the final outcome is, it’s an eroding asset. Having a transition agreement is not worth it if you continue to have the uncertainty. If you have five years after that, then it’s seven years of uncertainty for business. It becomes intolerable,” Mr McCoy told The Irish Times after the meeting.
Emma Marcegaglia, president of BusinessEurope, said companies across Europe were “extremely concerned” about the slow pace of negotiations and the lack of progress only one month before December’s European Council.
“Business aims to avoid a cliff edge and therefore asks for a ‘status quo-like’ transitional arrangement with the UK staying in the customs union and the single market, as this will best provide citizens and businesses with greater certainty,” she said.
Mr McCoy said the British ministers made clear that they hoped to negotiate a post-Brexit relationship with the EU which was more distant than that enjoyed by Norway but more comprehensive than Canada’s free-trade agreement.
He said the Government was right to take a firm approach at this stage of the negotiations by insisting that there must be further progress on the future of the Border before talks on Britain’s relationship with the EU can begin.
But Mr McCoy added that he was more optimistic after the meeting in Downing Street that Britain and the EU would avoid a cliff-edge Brexit.
“I think the business community will impress upon their own governments the necessity to avoid a hard cliff-edge. Despite the rhetoric, it’s in nobody’s interest to have a chaotic Brexit in March 2019. There will be a transition period. I’m more confident that there won’t be a hard cliff-edge in March 2019,” he said.
Property market slumps further amid ‘impromptu autumn sale’
about 16 hours ago
The average price cut of 6.7 per cent reflects “initial over-optimism and a tougher market”. Photograph: Andrew Matthews/PA
The proportion of London home sellers dropping their asking price is rising as the property market slumps further.
With more than four in 10 revising lower, the average price cut of 6.7 per cent reflects “initial over-optimism and a tougher market,” Rightmove plc said in a report published Monday. New vendors coming to the market in November are also reducing their expectations, albeit more modestly, with a 0.2 per cent decline from a month earlier to £628,219. That’s an annual drop of 2.4 per cent – a far cry from growth of more than 20 per cent in 2014.
“Buyer demand has cooled, and to warm up their interest both new-to-the-market sellers and those already on the market need to tempt them on price,” said Rightmove director Miles Shipside. “The effect is an impromptu autumn sale with the largest proportion of sellers on the market having reduced their initial asking prices at this time of year since 2010.”
While London has been worst affected by the cooling of UK housing, the rest of the country is also seeing widespread reductions, with 37 per cent of sellers nationwide cutting their asking prices. The average price for new properties to the market fell 0.8 per cent from a month earlier, to £311,043, although that’s still 1.8 percent higher than a year ago.
A separate report by LSL Acadata showed annual house price growth in the UK slowed to 0.8 per cent last month, the weakest pace since March 2012. Transactions slumped 5 per cent in the first nine months of the year compared with the same period in 2016. However, the Bank of England’s decision this month to raise interest rates for the first time in a decade will have a limited impact on demand, damped by the high proportion of households on fixed-rate mortgages and competition among lenders, Acadata said. – Bloomberg
Digital economy presents challenges to which US taxation system is unsuited
about 16 hours ago
President Donald Trump wants to overhaul corporate taxation in the United States, and bring home the large pot of profits being held overseas by US corporations. Photograph: Molly Riley/AFP/Getty Images
The tax reform debate continues to rage in the United States. And it is likely to do so for the next few weeks as the Senate and House of Representatives try to square the circle on new legislation that will benefit mostly rich companies and individuals.
The markets are already jittery with worries that the Republicans won’t be able to pass a tax reform at all (a very real possibility).
But it’s all a distraction from the debate we should be having, which is how to come up with a fair, growth-enhancing method of taxation for an age in which most wealth is going to reside in intellectual property that can be located anywhere.
As the debate stoked by the Paradise Papers and the increased offshoring of cash by multinational corporations has shown, rich people and companies can float over national concerns and existing tax structures with ease (and quite legally). This is the natural, albeit undesirable, effect of economic globalisation running so far ahead of political globalisation.
Large companies have long been able to “optimise” their tax affairs by moving capital where it is most convenient (labour is, of course, less portable). This sort of optimisation is easiest for finance and tech groups, since they traffic in capital and data. As these companies have come to represent a larger share of the economy (in 2016, four of the largest US public companies were Apple, Google parent Alphabet, Microsoft and Amazon), more and more tax revenue has been lost.
What we need is a fundamental rethink of how to align taxable profits with real economic activity and value creation. That probably means taxing something that cannot be moved around so easily – such as consumption.
Today, about half of all US corporate profits from overseas are located in tax havens such as Ireland, Luxembourg, the Netherlands, Switzerland and Jersey. This is, of course, a key reason for the omnipresent threat to liberal democracy from extreme politics; many people rightly feel that such entities are not contributing their fair share to the societies from which they profit.
How to fix this? The business argument, particularly in the US, is that we should cut the corporate tax rate to encourage companies not to offshore. But that would require closing loopholes to make up revenue, which is politically unfeasible.
Meanwhile, other countries would undoubtedly cut rates too, in a race to the bottom. US business also argues for a shift to a territorial system. While this would solve the double-tax problem on US companies, it would actually increase the incentive to shift profits and activities offshore, because they would no longer face any US tax if moved abroad.
In fact, both ideas are just a sticking plaster on a system of taxation that is fundamentally unsuited to the 21st-century digital economy – one in which the vast majority of wealth is being captured by companies that have no need of a major physical presence in their various markets, or even a fixed national headquarters.
European Union finance ministers from 10 countries, led by France, support a plan to tax tech groups on sales in countries where they do business. Other countries, such as India, have already implemented “equalisation” levies on payments in excess of $1,500 to foreign enterprises without permanent establishment in the country. When, say, Amazon makes a sale there, a certain amount of tax is withheld on the payment.
All this represents a big shift in the old order. The Silicon Valley giants are, of course, complaining bitterly. An OECD conference on the challenges of digital taxation held recently at the University of California Berkeley made for interesting listening.
While independent tax experts and academics argued for a new system in which companies could be found to have taxable “physical entities” in countries where they collect and monetise data from citizens, the tech companies are predictably digging in their heels.
Robert Johnson, a representative for the Silicon Valley Tax Directors Group, insisted: “Raw user data isn’t like oil – value is created by the development and production of goods and services, not consumption.”
Yet in the age of digital commerce, data really is the new oil: consumption of online goods and services is what generates the user data that companies can then monetise. Tech groups do not want to admit that just collecting data creates value – but plenty of research (including some funded by Google itself) shows exactly that.
It is not the cleverness of the algorithm that matters, but what you stuff into it. And national governments rightly believe their citizens should receive improved public services in return for their data – which of course must be funded by taxes.
Crafting a smart and fair system of digital taxation will not be easy. What is the true value of the data that firms collect? What percentage of tax should be taken from a transaction? Who would collect it and how? Answering these questions would be easier if large tech companies and others engaged in digital commerce were more forthcoming about their business models. When the public feels betrayed by the people who run such outfits, it is not good for politics – or business. – Copyright The Financial Times Limited 2017
Christian Aid says impact of Irish tax laws on economies in developing world is significant
about 17 hours ago
Sorley McCaughey, head of policy and advocacy at Christian Aid: Government must revisit the issue of the Irish tax system’s impact on developing economies
Ireland’s tax system is undermining developing economies’ tax bases, a leading Irish aid agency says. And tax treaties being signed by Ireland with these countries are reinforcing the position.
An analysis of the possible effects of the Irish tax system on developing economies, carried out for the Department of Finance in 2015, found that the Irish tax system on its own “can hardly lead to significant loss of tax revenue in developing countries”.
However, Christian Aid argues that the years selected for the study were in many cases unrepresentative of the true economic relationship between Ireland and these countries. It also notes that the study excluded most of those countries with which Ireland has more active foreign direct investment.
The aid agency also says that Ireland has been a much more significant player in the developing countries analysed since 2012 – the last year for which data was available for the 2015 study.
The agency has re-examined some of the assumptions made and data used in the Government study and says that the impact of Irish tax laws on developing economies is likely much more significant than found in the study.
While the figures might be modest by global standards, they are considerably more substantial when measured against Ireland’s aid budget funding for the countries concerned, Christian Aid argues.
Zambia and South Africa
As an example, it cites the tax forgone by Zambia in the years up to 2015 as a result of the tax treaty between the two countries “may have been equivalent to up to 40 per cent of Irish development aid to Zambia in recent years”.
South Africa potentially lost out on withholding tax amounting to more than three times the value of the albeit fairly low level of Irish aid it received in 2015, the agency reports.
“Irish aid flows to these countries may be comparatively small compared to their overall economies; but if the Irish Government considers such aid donations to be significant enough to spend Irish taxpayers’ money on them, then it should also consider that revenue loss at a similar scale as a result of Ireland’s domestic tax regime or treaty network, is also significant,” the agency says.
The report notes that between $500 million and $1.6 billion may be earned by Irish investors every year from developing economies in interest payments and dividend and a further $1.1-$1.7 billion in returns on portfolio investments.
Even with conservative estimates of their tax treatment, Christian Aid says, they “constitute inflows to Ireland of approximately two to four times the size of the Irish aid budget”.
It also questions the impact of the treatment of revenues from royalties and payments for goods and services on the tax take of low income countries. Data on income from services and royalty exports to countries in Asia, Africa and South America – with the exception of China and Bermuda – is currently redacted to for reasons of commercial confidentiality.
The agency criticises the exclusion from the 2015 government study of capital gains made by Irish holding companies on the sale of cross-border investments, in contrast, it says, to a similar type of study by the IMF, which said it was “a macro-relevant concern for several low income countries”.
Many of Ireland’s bilateral tax treaties preclude countries from imposing capital gains on the sale of a business in those countries when they are owned by an Irish holding company. Irish tax law also exempts Irish holding companies from paying tax here on such transactions in a move the agency says incentivises such a structure for corporate tax planning.
The study comes against a backdrop of tax avoidance by Irish individuals and companies, including major multinationals, through the use of tax havens disclosed in the Paradise Papers.
At the time of the study, carried out for the Department by the Dutch-based International Bureau of Fiscal Documentation, then minter for finance Michael Noonan said he hoped the study would “provide a road-map for best practice in Ireland’s future interactions with developing countries”.
Sorley McCaughey, head of policy and advocacy at Christian Aid, said: “The 2105 analysis was an important contribution, but two years on, the findings of this report make a strong case for the government to revisit the issue.
“The international tax context has changed even in the last two tears, and I believe the public would welcome any new government initiatives to demonstrate that the benefits of our tax code are not at the expense of some of the poorest countries in the world.”
Criticism of Bono inevitable, says guitarist; sometimes band ‘don’t get nearly enough stick’
Sat, Nov 11, 2017, 18:11
Updated: Sat, Nov 11, 2017, 20:49
The Edge of U2, in London today, discussing the impact of the Paradise Papers: “We do understand why people are angry with the system as it is, it definitely needs an overhaul. It’s a complex thing, it’s not like one nation can do it on their own.” Photograph: Roisin Ingle
The Edge (left) with Adam Clayton of U2 in London: “We’re wealthy people, you could say it comes with the territory. We are high-profile, sometimes you can feel a little put upon, sometimes you feel like we don’t get nearly enough stick.”
Bono performs with U2 in Trafalgar Square in central London tonight during the MTV Presents Trafalgar Square show ahead of the MTV Europe Music Awards tomorrow night. Photograph: Chris J Ratcliffe/AFP/Getty Images
U2 perform in Trafalgar Square, London, tonight ahead of the MTV Europe Music Awards tomorrow in Wembley. Photograph: Nick Ansell/PA Wire
U2 guitarist The Edge has said the criticism of Bono over the Paradise Papers and revelations that he used a Malta-based company to invest in a Lithuanian shopping centre was inevitable and that sometimes the band “don’t get nearly enough stick”.
Speaking in London shortly before the band were to take to a stage in Trafalgar Square for a free 7.30pm concert organised by MTV, he said the issue was complex.
“It’s a complicated thing,” he said in response to a question on whether Bono was treated unfairly over the recent revelations broken by the International Consortium of Investigative Journalists.
“We’re wealthy people, you could say it comes with the territory. We are high-profile, sometimes you can feel a little put upon, sometimes you feel like we don’t get nearly enough stick.
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“We do understand why people are angry with the system as it is, it definitely needs an overhaul. It’s a complex thing, it’s not like one nation can do it on their own … unfortunately there’s a lot of inaccuracies reported initially and at this point there are lawyers involved, so we will see how that works out.”
The Edge also spoke about anti-Trump sentiment on some songs on their widely anticipated new album, Songs of Experience. “We felt that to ignore it would be just weird – these are the things we care deeply about. People would expect us to step forward,” he said.
“Democracy sometimes throws up surprise results, you got to accept the results … in terms of values and ideals we differ so fundamentally from what President Trump is putting forward, and the sentiments that he’s putting out there and who he’s looking to get support from, it’s fear politics of the most cynical type.
“We don’t necessarily want to get caught up in the resistance to his presidency … we want to push forward. We feel OK to take him on in certain levels but we are going to keep on ploughing forward with what we believe in.”
The Edge was talking to reporters with Adam Clayton at the Trafalgar Hotel in London before the gig. The guitarist was wearing an enamel poppy badge on his lapel to mark Armistice Day in Britain, which is today.
On Sunday night, the band is set to receive the Global Icon award from MTV at the MTV Europe Awards at Wembley. Past recipients include Queen and Whitney Houston.
Tonight they will play eight songs to a 7,000-strong crowd who won free tickets in a ballot. Two songs from tonight’s gig will be played at that event.
London mayor Sadiq Khan had described the gig, which will also feature David Guetta, as a “once in a lifetime event … I have been saying loud and clear that London is open to talent, creativity and business. What better way to showcase this than one of the world’s greatest rock bands performing to Londoners from all backgrounds, for free, in the heart of our great city?”
No need to worry about economy overheating but we need to look past corporate taxes
about 10 hours ago
“The flow of corporate taxes that we so enjoy spending will one day dry up. We treat them as permanent revenues when they are so obviously anything but.”
It may come as a surprise but, on one measure at least, the global economy has never been in better shape. Deutsche Bank has counted up the number of economies currently in recession and reckons it is at an all-time low.
And, on International Monetary Fund forecasts, that number will fall further over the next few years. In terms of growth rates it is hard, by contrast, to assert that the world economy is booming but it is certainly looking healthier than at any time since the great financial crisis. Unemployment is falling, even in Europe, and central banks are either raising interest rates or talking about gradually scaling back the money-printing that has sustained, just about, economies over the last few years.
One of the puzzles over the decade since that crisis is just why the recovery has been so sluggish.
Normally, economies bounce back quickly and vigorously after deep recessions. Milton Friedman likened the business cycle to a violin string: the harder it is plucked the more it vibrates.
It’s as convincing an explanation of the trade cycle as can be found in most textbooks – and is at least as well supported by the data. But recoveries after financial crises seem to be different.
It takes a long time for decent growth rates to take hold; often it’s simply that paying down over-indebtedness just takes time. Whatever the reason, enough time now seems to have passed and growth is robust, if not booming, just about everywhere.
Even the UK seems to be staving off recession thanks to healthy growth in Europe and elsewhere.
There is much to be celebrated here, particularly in a domestic context. The small, open economy that is Ireland mostly depends on what is happening in the rest of the world.
The economic policy levers available to the authorities are very limited in number and scope – particularly in a monetary union. But domestic growth, boosted in no small part by external developments, is such that we now hear warnings about “‘overheating”.
This is a bit of puzzle. Until we have full employment and resultant concerns about wage inflation I would have thought that a high growth rate was welcome. Perhaps the worriers are already concerned about the possibility of wages going up. A number of things could be said about that. Mostly, bring it on.
According to OECD data (and other sources) Ireland has the most progressive tax system in the world. Through taxes and welfare payments we do as much or more than virtually any other country to relieve income inequality.
That’s something to be celebrated – but it’s not something we hear too loudly from the poverty lobby and class warriors. They focus on pre-income redistribution measures of inequality: these are indeed very high, particularly in comparison with other countries.
More jobs and higher wages seem to me to be the best solution. We wouldn’t have to do quite so much redistribution if we had a smaller problem to begin with. But Ireland is, today, a shining example of how the fruits of economic growth can be shared more equally via the actions of the State.
Not wholly incidentally, there are several other areas where Ireland looks relatively progressive; whether by accident or design, several aspects of economic life on this island make others look on in envy. While still too high in an absolute sense, our gender pay gap is, on average, less than in most other countries. We tend to score highly on measures of happiness. The next time you hear or read someone moaning about how awful things are, do bear all this in mind.
No economist can ever be upbeat without referring to the small print. The threats are all too obvious. The flow of corporate taxes that we so enjoy spending will one day dry up. We treat them as permanent revenues when they are so obviously anything but.
The global trading system that is in no small part the driver of both our prosperity and happiness is under threat. Neoliberalism, a term of abuse in most trendy Dublin dining rooms, has served us well. It is endlessly ironic that the people who created much that we now enjoy are so reviled, not least by their own direct descendants.
Ronald Reagan began the modern era with a plea in 1987 to Mikhail Gorbachev to tear down the Berlin Wall. Donald Trump, leader of the party that pretends to revere Reagan, promises: “We will build that wall.” A different barrier but one with very similar connotations.
Margaret Thatcher was the driving force behind Europe’s single market. Today’s British Conservatives betray that legacy with their nativism and determination to quit that same single market. They too are utterly committed to a wall. Actually, at least two walls: one between Britain and the continent, the other between Northern Ireland and the Republic.
We need not worry about an overheating economy. But we do need a plan B.
Arguments around regional planning never seem to get us anywhere
Sat, Nov 11, 2017, 05:49
The Western Development Commission has published its submission on the Government’s Draft National Planning Framework, bemoaning the lack of focus on the western region
It would take a brave politician to face down the obvious anti-urban bias in Irish political culture; or to question whether throwing resources at certain regions represents value for money for the State; or perhaps the inevitable tide of urbanisation should be accommodated rather than endlessly, and perhaps fruitlessly, opposed.
Ireland’s lopsided economy is after all no different to Britain’s. London’s population continues to mushroom as populations in Manchester, Liverpool and Glasgow dwindle to levels not seen since the beginning of the 20th century.
Young people want to be in the cities; the current wave of foreign direct investment wants to be located in built up urban areas with housing,schools and transport – these are trends are beyond the gift of government policy to arrest. The fact that 30 per cent of the State’s investment in road, rail and other utilities is now concentrated in the Greater Dublin Area is merely a reflection of need, not pro-Dublin bias.
Yet the drum to arrest this process continues to beat louder. Yesterday, the Western Development Commission (WDC) published its submission on the Government’s Draft National Planning Framework, bemoaning the lack of focus on the Western Region.
In its submission, the WDC also says there is no information as to how the plan’s 70 “National Policy Objectives” will be implemented, enacted or put into policy. “The draft is in fact quite general and aspirational and the real detail is only in the target population growth and jobs growth and in details of planning mechanisms,” it said, which highlights a wider problem around planning in Ireland and one pinpointed by the International Monetary Fund (IMF) in a report yesterday.
The IMF said there were serious shortcomings in the planning of major infrastructural projects here combined with the lack of a coherent national strategy to deal with the current bottlenecks in housing, health, water and education. Perhaps this issue deserves more attention than the urban/regional divide.